Kellogg v. Middlesex Mutual Assurance Co.

Supreme Court of Connecticut

August 22, 2017

SALLY KELLOGGv.MIDDLESEX MUTUALASSURANCE COMPANY

Argued
May 4, 2017

Procedural
History

Application
to vacate an arbitration award, brought to the Superior Court
in the judicial district of Stamford-Norwalk, where the
court, Hon. Kevin Tierney, judge trial referee,
denied the defendant's motion to dismiss; thereafter, the
case was tried to the court, Hon. Kevin Tierney,
judge trial referee, who, exercising the powers of the
Superior Court, rendered judgment granting the application to
vacate, from which the defendant appealed. Reversed;
judgment directed.

Pursuant
to statute (§ 52-418 [a] [3] and [4]), a trial court
shall make an order vacating an arbitration award if it finds
either that the arbitrators have been guilty of misconduct in
refusing to hear evidence pertinent and material to the
controversy or of any other action by which the rights of any
party have been prejudiced, or if the arbitrators have
exceeded their powers by manifestly disregarding the law.

The
plaintiff sought to vacate an arbitration award setting the
amount of the insured loss to her property resulting from a
tree falling on the roof and chimney of her home during a
storm. The plaintiff had filed a claim pursuant to a
restorationist insurance policy issued by the defendant
insurance company, under which payment of the full
restoration cost of the insured property would be made in a
two step process, with the defendant first making payment of
the actual cash value of the loss, and, once the restoration
or replacement was complete, paying the amount actually spent
to repair, restore or replace the damaged building. When the
plaintiff's appraiser and the defendant's appraiser
were unable to agree on the amount of the loss, the plaintiff
invoked the policy's appraisal provision, requiring the
loss amount to be determined through an unrestricted
arbitration proceeding. Under the terms of the policy, the
plaintiff and the defendant each appointed one appraiser to
serve as an arbitrator, and the two appraisers chose a
neutral third party arbitrator to act as the umpire, all
three of whom comprised the appraisal panel. After each
appraiser independently estimated the loss, the umpire
evaluated the differences between the two appraisers'
estimates and set the loss, which was an amount between the
two estimates. The defendant's appraiser accepted the
umpire's valuation, which became the panel's decision
on the amount of the loss. After the plaintiff filed its
application to vacate, the defendant moved to dismiss as
untimely the plaintiff's challenge to that portion of the
arbitration award specific to the building. Although the
trial court initially stated that it first would rule on the
motion to dismiss, it held eight days of trial, covering all
aspects of the motion to dismiss as well as the merits of the
application to vacate. The trial court denied the motion to
dismiss and granted the application to vacate the arbitration
award because it violated § 52-418 (a) (3) and (4). The
court determined that the panel prejudiced the
plaintiff's substantial monetary rights by disregarding
specific terms of the policy when it refused to award money
for losses claimed by the plaintiff, and by manifestly
disregarding the law by calculating depreciation when the
policy provided for no depreciation. On appeal from the
judgment granting the application to vacate, held:

1. The
trial court improperly vacated the arbitration award and
substituted its judgment for that of the panel when it
determined that the award violated § 52-418 (3): that
court's disagreement with the panel's ultimate
conclusions and the amount of the award, in the absence of
any determination that the panel engaged in misconduct
impacting the fairness of the arbitration procedures, did not
establish a violation of § 52-418 (3) and was not a
proper ground for vacating the award; moreover, there was no
claim that the arbitrators refused to postpone a hearing or
to hear any of the plaintiff's evidence, or otherwise
committed a procedural error, and there was testimony by the
plaintiff's appraiser that the defendant's appraiser
and the umpire considered all of the evidence that the
plaintiff's appraiser wanted to present to them.

2. The
trial court incorrectly concluded that the panel's
decision to calculate depreciation when the restorationist
insurance policy did not provide for depreciation evidenced a
manifest disregard of the law that justified vacating the
arbitration award pursuant to § 52-418 (a) (4): the
court improperly engaged in a de novo review when it
determined that the panel's decision to withhold
depreciation was an error obvious and capable of being
readily and instantly perceived by the average person
qualified to serve as an arbitrator, as the meaning of the
policy language was a matter for the panel to decide, and the
plain language of the policy permitted the withholding of
depreciation until repairs were made or the damaged property
was restored or replaced; furthermore, that court
misinterpreted the holding in Northrop v. Allstate Ins.
Co. (247 Conn. 242), which held only that an insurer
could not withhold depreciation from a replacement cost award
after a homeowner had incurred a valid debt for repairs, and
was not applicable to estimates, such as the estimate
obtained by the plaintiff, which generally impose no
obligation or debt on homeowners and do not address concerns
that the insured will forgo repairs and receive a windfall,
and, thus, the panel did not ignore a clearly governing legal
principle when it permitted the defendant to withhold
depreciation costs until the plaintiff had incurred a valid
debt for the repair or replacement of the property.

OPINION

D'AURIA, J.

In this
appeal, we consider whether the trial court properly vacated
an arbitration award setting the amount of an insured loss
caused by a tree falling on the insured's home. We
conclude that the trial court improperly substituted its
judgment for that of ...

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